2018 (10) TMI 1300 - HC - Income Tax

Penalty u/s 271(1)(c) - concealment of income by way of wrong claim of cost of acquisition to evade long term capital gains - Held that - We gather that the issue pertains to valuation of leasehold rights as on 1.4.1981. AO did not accept valuation adopted by the assessee and made corresponding additions. We notice that on merits itself substantial additions were deleted by higher authorities. Thus the issue itself was highly debatable and substantially fact based. In background of such facts the Tribunal held that this is not a fit case for penalty. No interference is needed. - Decided against revenue

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for concealment of income by way of wrong claim of cost of acquisition to evade long term capital gains. Whether ignorance of law can be a valid ground to hold that the assessee has not concealed income.

Analysis:

Issue 1: Penalty under Section 271(1)(c) of the Income Tax Act
The issue revolves around the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. The CIT (Appeals) deleted the penalty, which was subsequently confirmed by the Tribunal. The Tribunal noted that the issue was complex and debatable in nature. It observed that the assessee had acted upon professional advice for determining the fair market value of cost of acquisition, and there was no falsity in the claim made by the assessee. The Tribunal found no malafide intent in the explanation offered by the assessee and upheld the decision of the CIT (Appeals) to delete the penalty.

Issue 2: Valuation of Leasehold Rights
The core of the matter pertains to the valuation of leasehold rights as on 1.4.1981. The Assessing Officer disagreed with the valuation provided by the assessee, leading to corresponding additions. However, higher authorities later deleted substantial additions on merits, indicating a highly debatable and fact-based issue. Considering the debatable nature of the issue and the substantial relief granted to the assessee on merits, the Tribunal concluded that this was not a suitable case for imposing a penalty. Therefore, the Tribunal dismissed the Tax Appeal, emphasizing that no interference was necessary.

Conclusion:
The judgment primarily addresses the penalty under Section 271(1)(c) of the Income Tax Act and the valuation of leasehold rights. It highlights the importance of professional advice relied upon by the assessee, the absence of malafide intent, and the debatable nature of the valuation issue. The Tribunal's decision to uphold the deletion of the penalty underscores the significance of mitigating circumstances and factual complexities in tax matters.